Government Announces Tax Amnesty to Pay Pension Debts

President Mauricio Macri today announced a series of measures designed to cover historic pension debts, using funds brought into the formal system via a tax amnesty.

President Mauricio Macri announced plans to an audience of pensions (Photo via Casa Rosada)

Speaking this morning, Macri declared that the government will send a bill to Congress detailing a “National Programme of Historic Reparation for Retirees and Pensioners”. The bill aims to repay retirees who sued the state over underpaid pensions following the economic crisis in 2001-2002.

According to the president, the new law will adjust pension payments for those who have received favourable court rulings (retroactive according to the sentence), those currently in litigation (retroactive up to a maximum of 48 months), and those who could begin legal action based on the same problem. It is estimated that this will affect around 1m retirees.

“We are here to correct years of injustice,” said Macri to an audience at the Cultural Centre in Buenos Aires. “In the first place, those who are not receiving what they are rightfully owed will have their payments adjusted. And once the law is signed, retirees will being to receive the rightful amount, whether they are in litigation or not.”

The president also announced a new ‘Universal Old Age Pension’ plan, in which those over 65 will have the right to a basic income even if they have never made contributions or do not qualify for the standard state pension.

This income will be set at 80% of the minimum state pension for retirees, or around $4,000 at today’s values.

Tax Amnesty

Macri said that the new payments would be covered by the Sustainability Guarantee Fund at the pensions office ANSES as well as funds the government hopes to bring in to the formal economy via a new tax amnesty.

The amnesty will allow those with undeclared dollars and overseas assets to bring them into the formal system without penalty or the need to explain the source of the funds. There will be no charge on assets worth up to US$25,000, and a discounted 5% fine on property and assets worth up to US$80,000.

Above that threshold, the fee will be 10% until the end of 2016 and 15% until end-March 2017, when the amnesty window is scheduled to close.

“There are billions of dollars that Argentina are holding abroad,” said Macri. “They took them [out of the country] because they did not trust the state. We are asking them to join us now, to repatriate these funds.” However, as it stands, the amnesty proposal does not include any formal requirement or incentive to bring newly-declared assets back into the Argentine economy.

As a gesture to those who have no undeclared assets, the threshold for paying the ‘personal goods’ tax will rise from the current $305,000 to $800,000, and be phased out altogether by 2019.

That amnesty, which was extended on several occasions, only recovered a fraction of the funds targeted by the Kirchnerist administration (US$2.5bn).

The current government hopes its own plan will be more successful due to the added incentive of a new global information sharing system that will come into effect in 2017 as a way of clamping down on tax evasion. Finance Minister Alfonso Prat-Gay said this amnesty was a “final opportunity”.

“Argentina will have access to information in 48 country, and it will be difficult for anyone to hide money,” said Prat-Gay. “We are offering this final opportunity because from January, [tax office] AFIP will have all the instruments required to find out where the money is.”

When asked by journalists, Prat-Gay confirmed that the amnesty would apply to everyone, including public officials. This could be a sticking point when Congress debates the amnesty bill, with opposition Frente para la Victoria (FpV) leader Héctor Recalde telling La Nación they “won’t allow” the inclusion of public officials.

The amnesty announcement came one day after Macri declared on his first affidavit as president that he held $18m in an offshore account in The Bahamos, an island known as a tax haven. The president is still being investigated for his alleged connection to an offshore company set up in The Bahamas, as revealed by the Panama Papers scandal.